EPA Versus Markets, Yet Again

Perhaps the most important line in this article is that over the last 30 years without any Government intervention, heavy vehicle fuel economy has improved by one percent per year, due to the competitiveness of truck manufacturers who supply the industry. Now the Government seeks to introduce hundreds of pages of regulations which in effect will only do what is already being done, only now, if those draconian regulations are not adhered to, then the Government can impose penalties, thus making money from it…..TonyfromOz.

A common promise among politicians is to “run the government more like a business.” The Obama Administration seems to have promised to have “government run more businesses.” The latest in the line of government takeovers and mandates is the proposal to subject heavy-duty trucks to fuel-efficiency regulations.

These efficiency mandates are promoted as saving the vehicle operators money—the fuel costs supposedly go down more than the initial capital costs go up. What this Administration does not seem to be able to understand is that businesses (both truck buyers and sellers) are already seeking out these efficiency improvements.

Indeed, the EPA’s own analysis of the proposed regulations notes that the fuel efficiency for heavy-duty vehicles has improved about 1 percent per year for the past 30 years. This improvement came without any fuel-economy standards—that is, entirely in response to market incentives for efficiency.

The proposed rules for heavy-duty vehicles, which would almost certainly generate thousands of pages of rules and supporting documents, seeks to increase the efficiency of “vocational trucks” (the big ones, not pickup trucks) by 10 percent by 2018. This projected improvement is in line with the current, market-driven, unregulated, trajectory of efficiency without regulations.

So why worry if the regulatory targets are not much different than where markets are already going? Because the regulatory approach will be a costly mess of bureaucratic minutiae and dictates that hobble creativity and ingenuity.

To its credit, the EPA recognizes that an across-the-board miles-per-gallon requirement could very well reduce efficiency by leading to many more trips by smaller trucks. So there will be no one-sizes-fits-all efficiency floor. This means there must be different mandates for different vehicle configurations. Nth-degree improvements in aerodynamic efficiency make less sense for trash trucks than they do for long-haul semis, and vice versa for hybrid-drive systems, whose benefits come with stop-and-go driving. The EPA notes:

Due to the varying needs of the industry, many of these trucks are custom built resulting in literally thousands of different truck configuration. [sic] Finally, usage patterns and duty cycles also greatly affect fuel economy, for example how trucks are loaded (cubed or weighed out) and how they are driven (delivery trucks travel at lower speeds and make frequent stops compared to a line-haul combination tractor). The potential to reduce fuel consumption, therefore, is also highly dependent on the truck configuration and usage.

So the appropriate regulations need to account for thousands of different configurations multiplied by the variety of usage patterns. This may be a job creator for accountants and engineers at the EPA, but it will be a job-killing nightmare for people in the trucking industry.

The heavy-duty truck market has provided decades of cost-effective efficiency improvements and can do so in the future. However, the proposed EPA regulations promise much more innovation-numbing red tape than they do actual cost savings.

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